Only an outsider CEO can help Microsoft

Unless Microsoft finds its next CEO outside its current and former ranks, it won't change, say analysts.

Microsoft's board of directors must hire a new CEO from outside the company's ranks to follow through on retiring chief executive Steve Ballmer's promise to reinvent the tech giant, analysts said.

Even then, with the challenges Microsoft faces from declining PC sales and its inability to capitalize on the massive shift to mobile computing, there's no guarantee of success. But who the board selects will really be the first and best indicator of whether the strategic shift and recent reorganization — both aggressively promoted by Ballmer — can remake the once-dominant technology company.

"It will be telling, who they pick, when it comes to whether the new direction works," said Michael Silver of Gartner in an interview Friday. "It really depends on who they select."

Silver was referring to the mutation of Microsoft from a company that sells packaged software to one that stresses devices — both its own as well as those built by its long-time partners like Hewlett-Packard and Dell — and services, often software sold as a service through subscription.

Most analysts believed that the strategic direction and corporate reshuffling were not at risk because of Ballmer's impending departure.

"Ballmer's retirement is not a repudiation of the strategy," argued David Cearley, also of Gartner, adding that the decision to refocus the technology giant was supported at the board level. "I think it's very likely that Ballmer's decision [to retire] is part of a broader strategy of the reorganization in July geared toward shifting the company's culture."

Others countered that the new CEO would not only have to implement the strategy — a difficult task in itself — but may demand the power to change that strategy before accepting the challenge.

"Ballmer had the approval of the board to change the company. He got board buy-in," said Patrick Moorhead, principal analyst at Moor Insights & Strategy, pointing out that the board could reverse its decision. "I think the strategy is on the table and the reorg is on the table. It really depends who comes in as CEO."

Most experts hoped that Microsoft would look beyond its own ranks for a successor, who would be just the third CEO of the 38-year-old company after co-founder Bill Gates, then Ballmer, who took the reins in 2000.

They reasoned that a current executive promoted to the top spot would simply be a "same old, same old" copy of Ballmer who would lack the motivation to dramatically change the company.